Category Archives: Assessment Collection

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To tow or not to tow…with apologies to William Shakespeare, that is the question at the heart of long-running litigation between an Anne Arundel County condominium and owners whose vehicles were towed from the condo parking lot. The Maryland Court of Appeals will soon resolve the dispute over a condominium association’s authority to suspend a condo owner’s use of the common elements when the owner is in arrears in payment of condominium assessments. Continue reading →

The Maryland legislature has passed legislation which affects the management and operation of condominiums and homeowner associations. New laws which take effect October 1, 2016 include:

Resale Disclosures. Homeowner associations will be required for the first time to provide resale disclosure information to an owner selling a home in an HOA. For condos which have long been required to provide resale disclosures, the disclosure requirements have been clarified or changed on matters such as assessments, replacement reserves, pending litigation, unit alterations, and violations of health or building codes. And, the amount which condos, HOAs and management companies may charge for providing resale disclosure information is capped by the new law.

Tax Sale Procedure. The purchaser of property at a tax sale will be required to notify condos and HOAs when a court suit is filed to prevent owners of property in those communities from keeping ownership of property. The new law also provides that when a tax sale is approved by the court, the tax sale purchaser is responsible for payment of condominium and homeowner association assessments from the date of the court judgment, whether or not a tax sale deed to the property is recorded in the land records.

Assessment Collection. A court suit will not be permitted for any unpaid assessments where the time for filing suit has expired. Any subsequent payment on the debt, or written or oral affirmation of the debt will not revive or extend the statute of limitations. This applies to all suits involving consumer debt, not just association assessments.

Home Gambling. Card games and mah jong games hosted in a residence not more than once a week will now be allowed where the total gambling bets for all players is no more than $1,000 in a 24-hour period. In senior communities with age 55 restrictions, these games will also be allowed in the common areas.

Legislation considered but not enacted would have required state registration of all condos, co-ops and HOAs, and would have made it easier to amend association governing documents by allowing an owner’s failure to vote on a proposed amendment to be counted as that owner’s approval of the proposed amendment.

Also rejected was a bill to prohibit provisions in condominium sales contracts and bylaws which limit the ability of condo associations to file suit to enforce construction warranties on the common elements.

The federal government agency which regulates Fannie Mae and Freddie Mac recently announced that its 2015 goal is to “avoid foreclosure whenever possible” and provide “more favorable outcomes for borrowers”. For condos and HOAs with owners not paying their mortgage and association assessments, this means continued delay in lender foreclosures.

Many borrowers continue to own homes where mortgage payments have not been made for several years. More than half of all delinquent loans held or guaranteed by Fannie Mae and Freddie Mac are at least one-year delinquent, according to the Federal Housing Finance Agency (FHFA) which is responsible for the supervision of these housing finance companies. As of late 2014, more than 300,000 loans with a total unpaid principal balance of about $54 billion were over one-year past due.

In January 2015, FHFA Director Mel Watt reported to a congressional committee that it expects Fannie and Freddie to increase consumer awareness of the Home Affordable Refinance Program (HARP) to reduce mortgage payments and to “continue refining and improving other loss mitigation and foreclosure prevention strategies.” Mr. Watt explained that FHFA will continue to review loss mitigation options to help families stay in their homesand stabilize communities.

FHFA has also instructed Fannie and Freddie to reduce the number of severely delinquent loans they hold by selling more of these loans to private investors which have experience to successfully provide foreclosure alternatives to borrowers who are seriously delinquent.

Under new FHFA guidelines issued in March 2015, purchasers of delinquent loans are required to evaluate all borrowers for loan modification, short sale, and deed-in-lieu of foreclosure as alternatives to foreclosure. Foreclosure must be the last option.

The federal policy of delaying residential foreclosures could mean several more years before a property is foreclosed on by the lender. This is likely to cause continued financialhardship for condominiums and homeowner associations where the owner is not paying the association assessments.

Separately, FHFA has recently filed suit seeking to invalidate foreclosure sales based on HOA assessment liens where state law recognizes a “super priority” for such liens. In Nevada and the District of Columbia which have “super priority” lien statutes, appellate courts have recently ruled that foreclosure of such liens extinguishes the mortgage. FHFA contends that such foreclosures are contrary to federal law to the extent they extinguish the Fannie Mae mortgage interest in property.

The 2015 legislative session of the Maryland General Assembly ended April 13 after lots of talk but not much action on bills concerning condos, coops and homeowner associations.

Legislation to extend resale disclosure requirements to homeowner associations and cap the fees which may be charged by condos and HOAs died in the final hours of the legislative session. As passed by the House of Delegates, the bill would also have limited the liability of a condo or HOA for issuing an incorrect resale disclosure statement. The Senate approved the fee cap but did not agree to the liability limits. Therefore, the legislation was not enacted.

A bill to prevent developers from limiting condominium statutory warranty rights was withdrawn; and a bill to require access to common areas for political candidates was rejected on initial review by a House legislative committee.

A proposal to eliminate a 3-month waiting period before a housing coop can initiate legal action to evict a coop member for not paying assessments was referred for further study. Legislation to regulate community association managers was not considered this year for the first time in several years

Although not limited to community associations, several other bills would have made it more difficult to collect assessments from delinquent owners. One bill would have restricted the ability to collect court judgments by increasing the amount exempt from garnishment. Several other bills proposed to delay residential foreclosures. These bills were not enacted.

These topics may get another look next year. For 2015, the General Assembly session had lots of talk—but no new laws regarding governance of condos, coops and HOAs.

A new law in Montgomery County, Maryland requires that the owner of property in a condo, coop or HOA must be current in payment of association assessments in order to obtain a County rental license to lease the property. As part of the application for a rental license beginning June 16, 2015, an owner must certify that the assessments are no more than 30 days past due.

Additionally, the County may deny, suspend, revoke or refuse to renew a housing rental license if the board of directors of the condo, coop or HOA submits a recorded statement of lien or unpaid court judgment as proof of unpaid association assessments.

Prince George’s County and Howard County have similar laws linking payment of association assessments to the issuance and revocation of a rental license.

Despite the recent arctic air sweeping through Maryland, the 2015 Maryland legislative session is heating up.

After a slow start in January with many new legislators and a new Governor taking office, a rush of bills were introduced in February. Among the bills concerning governance of Maryland condos, coops and HOAs are proposals to (1) prevent developers from limiting condominium statutory warranty rights; (2) require access to common areas for political candidates; and (3) require homeowner associations to provide resale disclosure information and cap the fee charged by condos and HOAs for providing resale disclosure information.

A proposal to change the housing cooperative law adopted in 2014 would eliminate a 3-month waiting period before a housing coop could initiate legal action to evict a coop member for not paying assessments.

Other legislation under review would restrict the ability to collect court judgments for delinquent assessments. Although not limited to condos, coops and HOAs, the bill would make it more difficult to obtain money in bank accounts and sell property to pay a person’s debts.

Legislation regarding licensing of community association managers (which had been considered the past several years) has not been introduced in 2015.

The 90-day legislative session of the Maryland General Assembly runs until April 13, 2015.

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The Thomas Schild Law Group provides legal services to community associations – condominiums, homeowners associations, and cooperatives – in Maryland and the District of Columbia. We also represent property owners regarding contract review, business disputes, and debt collection.

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